Tap the potential of the masses to lift growth

Share

In the diverse forces driving social unrest around the world this year - the Arab Spring, the Occupy Wall Street protests and the growing concerns about inequalities across Asia - there is a valuable lesson that can no longer be dismissed.

Economic growth alone is not enough to resolve the problems of unemployment, discontent and exclusion. Countries and institutions, such as the Asian Development Bank (ADB), must seek ways to draw broad segments of people into economic activities - in other words, inclusive growth.

In the wake of growing economic hardships, however, it is tempting to think that the priority is to achieve just any type of growth, regardless of how it is generated or shared. That, though, would be a big mistake. In China, India and across Asia, rising inequalities are proving to be a destabilising force.

There is also the fear that actions to reduce inequality will block growth itself. That is why it is important to see inclusive growth as an approach that initiates growth from the broadest possible spectrum of society.

The ADB's experience suggests a three-pronged emphasis in policies. First, investments need to help generate broad-based opportunities for people. Second, they must improve people's ability to participate in these opportunities. Third, they ought to build social safety nets to help mitigate the risks and vulnerabilities of uncertain markets and political landscapes.

Broader opportunities arise from capitalising on key complementarities among different lines of investments. For example, when an institution finances a highway, it needs to envisage its connection to rural roads, and in turn to post-harvest infrastructure, education and health facilities.

Access to resources, particularly finance, is vital. Yet, this access for the poor has been limited, possibly due to an excessive focus on private initiatives alone, rather than on supporting an adequate regulatory framework as well.

Strengthening people's ability to participate in growth, meanwhile, calls for changing market conditions that put the poor at a disadvantage. More investments in people and assets are needed, especially to enhance the capabilities of the poor.

Finally, better social safety nets are integral to bringing about more inclusive growth. While middle-income countries such as Brazil and China have made progress, there is the need for targeted social safety nets in other countries.

Such investments are valuable not only in sharing the benefits of growth; they are essential to ensuring that high growth can continue at all.

Vinod Thomas is director general of independent evaluation at the Asian Development Bank, Manila. vthomas@adb.org